Emergency Fund Accounts – Personal Finance Basics

As a financial consultant and I have coached a lot people as to why emergency funds are critical. In an earlier post you learned crucial personal finance basics with regards to creating an emergency fund like budgeting, goal setting and automation. Today I’ll discuss a few quick tips to help you pick where to invest your emergency fund.

Convenience – If you are like lots of people, you want to make saving into an emergency fund as fluent and simple as you can. Coaching personal finance basics has also shown me that if it’s not easy, chances are it won’t get done. You likely have a checking account. If so, you probably have a savings account in place too, if not you could open one with your bank on the Internet or at your branch. I recommend using this account to park your emergency funds. Chances are the interest rates aren’t great, but it’s an a simple account you probably have, or you could set up in a jiffy.

High Interest Savings – You shouldn’t worry too much about the interest rate you get with your emergency fund as it’s considered a short-term investment. A personal finance basics way of thinking is that you’ll probably use the fund within the next five to seven years, it’s short-term. ING is avery popular savings vehicle, as is PC in Canada. There are plenty of high interest savings accounts available to create online, just be careful of their fees, terms and conditions and legitimacy. Money market funds is one other choice, and can even provide higher interest than savings accounts, but they aren’t guaranteed. I have personally used ING for my emergency fund and think its excellent.

Liquidity – How quick can I get my money? Another important factor you need to think about is how accessible are your emergency funds. The simple rule with this is that it should be available by less than five days at the very most. You should try to get a fund that could pay out your money within 24 hours of when you need it. The personal finance basics question to ask yourself with this when choosing an account is “Can I get the money when I need it?”

I hope these personal finance basics regarding convenience, high interest savings and liquidity will help you make your emergency find into a reality. Check our resource link for free budget spreadsheets and other financial calculators to give you the head start you may need. We go more in depth in our e-book as well. The best tip I can give is to get it started. Even if you only got a 0% rate of return, you will still have money tucked away for those unexpected expenses that you wouldn’t have otherwise.